28 April 2011

Thought Bubbles on Population and Growth - Dick Smith

I read with interest and not a little dismay the recent On Line Opinion article by Ross Elliott. Mr Elliott is a property developer and his views are consistent with those few who stand to benefit from ever-increasing population growth in Australia: developers, media companies and of course retailers. But for most Australians, the advantages would be few and the negative effects would be many.

I don't mean to be unkind to the developers. In fact, I suspect secretly many of them agree with me that our headlong rush for crude population growth is undermining the quality of life of many Australians and doing nothing to help the rest of the world either. Recently I addressed a gathering of the Property Council of Australia, and privately many of the attendees said they agreed with me. We simply haven't thought through the negative consequences of population growth for Australia or the world.

Far from being a mere 'Thought Bubble' as Mr Elliot suggests, I have given the question a great deal of thought in recent times, and will be expanding on them at length in a book, The Population Crisis, to be published next month. Let me give you a hint of what it contains. But first, I would like to dispel a myth or two.

Firstly, Mr Elliot repeats a whopper first put out by the Murdoch Press which deliberately misreported my recent comments on the subject. I have never called for a 'two-child policy' as if there should be some kind of government edict setting a limit on the number of children Australian families should have.

Quite the contrary. I believe that once they are well-informed, Australians will make up their own minds about what they believe to be the right number of kids they have. What I do believe however is that it is high time we dump the wasteful baby bonus and other tax measures which currently cost us well in excess of $1 billion annually in artificially encouraging Australians to have three or more children. There are many good reasons to drop this silly scheme, not least of which is that it disadvantages those who choose to have small families, or none at all. Governments should get out of people's bedrooms full stop.

Again and again as I tour Australia discussing our failure to have a sensible plan for population, I ask simple questions: Why would we want to rapidly increase our population? What's so great about constant growth? What are the advantages for average Australians? I fail to ever get a convincing answer. The best the "pro-growthers" come up with is "because we can", and that of course, is no answer at all.

It's often claimed by the pro-growth lobby that Australia can never run out of land, because we have very low population density compared to our land mass. This is a really useless concept for making decisions about Australia's future. As has been well-established in report after report, Australia is best looked upon as two geographical nations: one a vast and arid interior with little value for settlement or agriculture; the other a narrow coastal strip with limited resources of soil, water and a fragile ecosystem. Necessarily it is this thin strip we must inhabit and it is far from being in endless supply.

Most mainland Australian capitals are now building highly expensive desalination plants just to supply drinking water for our existing population. Much of Australia is only just now emerging from a decade long drought that brought devastating consequences to our agricultural system. The history of climate in Australia - and the predictions of climatologists – suggest it is only a matter of time before drought returns and we must sensibly consider ourselves to be in a more-or-less permanent state of water scarcity. Dreams of turning back the northern rivers are nothing more than wishful thinking.

A lack of certainty with water means we must always be cautious about ensuring food security, not only for Australians, but for the millions of people around the world who depend on Australian grain and meat for their livelihood. For those who scoff at the idea of Australia one day running short of locally produced food, or having little or nothing to export, I urge you to read the report on our food security recently released by the nation's top scientific advisory body, the Prime Minister's Science, Engineering and Innovation Council.

The report sums up the challenge neatly, and makes it clear that our future is inextricably linked to population decisions:

The likelihood of a food crisis directly affecting the Australian population may appear remote given that we have enjoyed cheap, safe and high quality food for many decades and we produce enough food today to feed 60 million people. However, if our population grows to 35-40 million and climate change constrains food production, we can expect to see years where we will import more food than we export. We are now facing a complex array of intersecting challenges which threaten the stability of our food production, consumption and trade.

Yet such thinking never seems to account for the loss of prime agricultural land involved in building new outlying suburbs. I believe we have now reached a crisis point, concreting over our richest soils and most productive land. Just how long can we sustain the equation of increasing population and diminishing agricultural capacity? Once again the "pro- growthers" are silent.

Let's not for a minute underestimate the massive costs of sustaining our ever-expanding cities. The infrastructure costs of transports, and retrofitting the connections between the centre and the outer suburbs are immense. The newly elected State Government in Victoria has discovered that the costs of extending rail services to it new western suburbs has blown out to $5 billion and will be years behind schedule - if it is ever funded at all. All this for a couple of new stations.

These massive costs, faced by all our cities, will be borne by generations of taxpayers, yet any benefits will soon be swamped by increased numbers. As ever, we will continue to chase our tails on critical infrastructure as long as we remain addicted to growth.

Mr Elliott blames planning controls for restricting the release of new land for development, and in turn says this is to blame for Australia's precariously high property prices. He is surely being disingenuous, knowing full well that our massive population growth of recent years - close to 500,000 in 2010 alone – is the real reason for our unsustainable housing costs. We are now faced with another trap – needing more growth to maintain prices for fear of a vicious (and now probably inevitable) crash. It's this Ponzi Scheme economics that lies at the heart of most pro-population thinking.

The biggest one of course is the concerns about aging Australia and the costs of future pension payments. Never mind that in fact Australia has one of the youngest age profiles of any developed nation and studies by the Productivity Commission show the threat is exaggerated. Mr Elliot argues we must bring in more and more migrants to effectively pay the pensions of the retiring Baby Boomers or else we face ruin. Yet of course those migrants will in turn become elderly too one day, leaving us with an even bigger problem down the track.

The truth is most Boomers did pay their taxes in order to ensure a minimum pension and have been putting money away for their retirement. The problem is that governments, under pressure to supply the infrastructure to keep pace with the ever-expanding population, did not keep their end of the bargain. They have consistently failed to put tax receipts away at the necessary level to provide for pensions. And the reasons for this are pretty clear. Politicians are vulnerable to the pleadings of well-organised special interest groups, and one of the most effective has certainly been the pro-growth lobbyists and their willing accomplices in the media.

Mr Elliot claims Japan has suffered economically for failing to deal with its demographic challenges. In fact economists know the real cause of Japan's stagnant economy of the last decade: it is still reeling from the collapse of an unsustainable asset bubble, especially in property. The warning signs are there for Australia if we care to look. Now Japan must deal with a further massive blow, but at least its cohesive society is pulling together. One wonders if such a recovery from disaster would be possible if the nation was not held together by a common culture.

Yes, we could build a dozen Dubais along Australia's east coast, tear out every last piece of coal to power it, and import our food, at least for a while. Yes we could open the gates and bring in young migrant workers to pay for our current profligacy and prop up the property sector with no thought for the future. But the question remains, why? Who really benefits from such policies?

Later this year global population will pass seven billion. Mr Elliott may be relaxed by the slowing of absolute growth, but we are still adding nearly 80 million people to the planet every year and will certainly add at least two billion people more by mid century. With current trends in consumption, that means we need to find twice the energy and food we currently produce to supply the world's ever spiralling demands.

Can anyone really feel relaxed about the prospects of feeding, housing and powering a world that is already stretched to the limit? As we make the necessary and unavoidable transition from an oil-based economy, these demands will stretch our ingenuity to the limit - and perhaps beyond.

We have seen how fragile our growth-based economic system is. A collapse of the financial markets, followed by ghastly natural disasters have shown that we are just one unexpected shock away from crisis. It is foolish to expect that Australia will not be affected by these dangers, and we must prepare now for an uncertain future. The pursuitof endless growth is the least intelligent response we can make. We need a sensible discussion about the options and that means dispensing with the old myths that continue to cloud our thinking.'

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